Building a home is an exciting process! Sifting through paint swatches, floor samples and dreaming up every room of your future home is any HGTV fan’s perfect day.
But, in the midst of all those Pinterest boards and Houzz idea books are the nitty gritty tasks the homeowner has to address before any shovels break ground. One of these confusing and at times overwhelming tasks is Builder’s Risk Insurance. When do you need it? What is it? How do you get it? Joyner homes has asked the experts at Wilkinson Insurance Agency, LLC. to help guide you through this process.
If this is your first time going through a construction process, you are probably wondering, what’s Builder’s Risk Insurance?
Builders Risk Insurance, sometimes referred to as Course of Construction is unique. It’s a form of insurance that covers a building where the building or insured area is currently being constructed. It protects a person’s or organization’s insurable interest in materials, fixtures and/or equipment being used in the project should those items sustain direct physical loss or damage from a covered peril.
Most broad form policies will cover damage caused by a variety of perils such as; theft, vandalism, aircraft damage, fire, hail damage, explosions and damage caused by heavy winds. Of course, every policy also includes certain limitations and exclusions from coverage. These exclusions vary from carrier to carrier. Some common exclusions across policies and carriers are damages caused by intentional acts by the client or their builder, governmental actions, and damage caused by war. Other common exclusions may include damage caused by flood waters and earthquake damage.
It’s important to ask your insurance provider what perils are covered. This is not something you want to pick out based on price alone. If you are looking for the cheapest possible premium, you might be drawn to a “specified peril” policy; however, if a loss occurs and it wasn’t directly specified in the policy, you may be shocked to learn your home (under construction) wasn’t covered. An example of this would be a policy specifying that it covers damage from lightning strikes to the covered property. If lightning strikes a nearby building causing a fire that damages your construction project, this type of specified risk policy wouldn’t cover the losses because lightning didn’t strike the construction project itself. — Moral of the story— Ask lots of questions when choosing your policy!
Now you may asking yourself, who buys Builders Risk Insurance- You or your builder?
You purchase the policy, but it’s usually purchased by the custom builder or general contractor as well. This is often a required condition of many new home construction contracts. It’s much safer for the you (the property owner) to obtain the builder’s risk policy because of ownership in the building even while it’s under construction. You will need to purchase coverage for 100% of the anticipated construction costs. The construction costs are listed on your construction contract and your builder should be happy to answer any questions you have pertaining to that.
There are a few more questions to ask your carrier in regard to your Builder’s Risk Policy: What does it cover? Do I have to maintain this coverage as long as I live in this home? How does it all work?
If you choose Wilkinson Insurance Agency, LLC. as your provider, here are the answers to those questions:
What does it cover? The policy will pay for damages up to the coverage limit. – which should be the total construction cost listed on your construction contract.
Do I have to maintain this coverage as long as I live in this home? How does it all work? Coverage should be effective prior to the delivery of materials to the job site. Your builder should be able to provide you with these time frames. It can provide coverage for the structure only or also the materials on site waiting to be installed. Polices are often written in terms of three, six or twelve months. If the project is not completed by the end of the policy term, coverage can usually be extended. Coverage terminates at the closing of the sale of the building, occupancy, or the policy expiration date. After the Builder’s Risk Policy coverage ends, you will need to purchase property insurance in the form of a home owner’s policy or commercial property policy. Covered perils generally include, fire, wind (maybe limited in coastal areas), theft, lightning, hail, explosion, vandalism. Standard exclusions include, earthquake, employee theft, water damage, weather damage to property in the open, war, government action, and mechanical breakdown. Another important exclusion which should be noted is the damage resulting from faulty design, planning, workmanship, and materials. These types of issues would be addressed under a contractor’s Professional Liability policy rather than Builders risk.
Some Important Exclusions to remember when getting your policy through Wilkinson Insurance Agency, LLC. are:
*The policy will not cover property of others
*Sub-Contractors are required to have their own insurance
*There is no coverage for tool or equipment
*No coverage for professional liability
*It does not cover accidents at the job site
*Coverage typically ends when the building is completed or occupied.
Our goal at Joyner Homes is to make your building process as easy, comfortable and exciting as possible. We welcome questions and we will guide you every step of the way. We work with many reputable insurance providers and we will always do our best to connect you with who we feel will be the best fit for your project.
Wilkinson Insurance Agency, LLC. has been a great resource. Cheryl and Charla are very knowledgeable, friendly and timely. If you are looking for a carrier that has your best interest at heart and you don’t dread talking too, they are your best bet! They are also located in the Eastern Hancock School district. Click here to meet the Wilkinson Insurance Team! or call them at 765-781-6161.